Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street , 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Sasbadi Holdings Berhad( KLSE:SASBADI ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Sasbadi Holdings Berhad
Sasbadi Holdings Berhad's Improving Profits
In the last three years Sasbadi Holdings Berhad's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Sasbadi Holdings Berhad's EPS has risen over the last 12 months, growing from RM0.018 to RM0.021. There's little doubt shareholders would be happy with that 13% gain.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Sasbadi Holdings Berhad achieved similar EBIT margins to last year, revenue grew by a solid 17% to RM109m. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Sasbadi Holdings Berhad is no giant, with a market capitalisation of RM70m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Sasbadi Holdings Berhad Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Sasbadi Holdings Berhad insiders own a meaningful share of the business. Owning 42% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Although, with Sasbadi Holdings Berhad being valued at RM70m, this is a small company we're talking about. So despite a large proportional holding, insiders only have RM29m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Sasbadi Holdings Berhad, with market caps under RM879m is around RM473k.
The Sasbadi Holdings Berhad CEO received total compensation of only RM40k in the year to August 2024. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Is Sasbadi Holdings Berhad Worth Keeping An Eye On?
One positive for Sasbadi Holdings Berhad is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Sasbadi Holdings Berhad, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. You should always think about risks though. Case in point, we've spotted 3 warning signs for Sasbadi Holdings Berhad you should be aware of, and 1 of them can't be ignored.
Although Sasbadi Holdings Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Malaysian companies that not only boast of strong growth but have strong insider backing .
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature.
We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice.
It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
